Application Management Services. Application development, management, maintenance and support services for packaged software, as well as
custom and legacy applications. Value is delivered through the company's global resource capabilities, industry knowledge and the standardization and automation of application development.

Software consists primarily of middleware and operating systems software. Middleware software enables clients to integrate systems, processes and
applications across a standard software platform. IBM middleware is designed to open standards which allows the efficient integration of disparate client applications that may have been built
internally, or provided by packaged software vendors or system integrators. Operating systems are the software engines that run computers. Approximately two-thirds of external software
segment revenue is annuity-based, coming from recurring license charges and ongoing subscription and support from one-time charge (OTC) arrangements. The remaining one-third of
external revenue relates to OTC arrangements, in which the client pays one up-front payment for a perpetual license. Typically, arrangements for the sale of OTC software include one year
of maintenance. The client can also purchase ongoing maintenance after the first year, which includes product upgrades and technical support.

Application Management Services. Application development, management,
maintenance and support services for packaged software, as well as custom and
legacy applications. Value is delivered through the companys global resource
capabilities, industry knowledge and the standardization and automation of application
development.

Application Management Services. Application development, management, maintenance and support services for packaged software,
as well as custom and legacy applications. Delivering value through the company's global resource capabilities, industry knowledge, and the standardization and automation of application development.

Systems and Technology segment provides IBM's clients with business solutions requiring advanced computing power and storage capabilities. Approximately
55 percent of the Systems and Technology's server and storage sales transactions are through the company's business partners; approximately 45 percent are direct to end-user
clients, more than 40 percent of which are through the
Internet at ibm.com. In addition, Systems and Technology provides leading semiconductor technology and products, packaging solutions and engineering technology services to clients and for IBM's own
advanced technology needs. While not reported as external revenue, systems hardware is also deployed to support services solutions.

Application
Management Services.
Application development, management, maintenance and support services for
packaged software, as well as custom and legacy applications. Delivering value
through the companys global resource capabilities, industry knowledge, and the
standardization and automation of application development.

SYSTEMS AND TECHNOLOGY
segment provides IBMs clients with business solutions requiring advanced
computing power and storage capabilities. Approximately 55 percent of the
Systems and Technologys server and storage sales transactions are through the
companys business partners; approximately 45 percent are direct to end-user
clients, more than 40 percent of which are through the Internet at ibm.com. In
addition, Systems and Technology provides leading semiconductor technology and
products, packaging solutions and engineering technology services to clients
and for IBMs own advanced technology needs. While not reported as external
revenue, systems hardware is also deployed to support services solutions.